The land you own and occupy as your home is your principal place of residence (PPR). It is exempt from land tax.
Generally, we know when a property is your PPR because you tell us in the Notice of Acquisition of an Interest in Land (NOA), a form you complete and lodge with the Land Registry when you acquire property. The Land Registry provides the NOA information to us so we know about the change in land ownership and whether the property is your PPR so we can apply the exemption.
If a property you own becomes your PPR in other circumstances, you can apply for a PPR exemption.
When you no longer occupy the land as your PPR, the PPR exemption should be removed and land tax may apply. It is your responsibility to notify us when this happens and failing to do this may result in a notification default and result in penalties and interest.
Note: Generally, you can only claim one PPR exemption anywhere in Australia at a time, although there are limited exceptions to this rule.
The PPR exemption is also available for land:
- Owned by eligible trustees, or
- Used as a PPR by a person granted a right to reside on the land under a will or testamentary instrument, or
- Used as a PPR by a person with a life interest in the land
The PPR exemption does not apply to land owned by companies, body corporates and other organisations, even if the land is occupied by any of the shareholders or members of the company or organisation.
- Who else can claim a PPR exemption?
- What are the PPR exemption requirements?
- Can I have more than one PPR?
- Changes in use affecting the PPR exemption
- A partial PPR exemption
- Joint owners and the PPR
This type of PPR exemption is generally only available for land:
- Owned by trustees of trusts, and
- Used and occupied as the PPR of a vested beneficiary, who is a natural person with either a vested beneficial interest in the land (such as under a fixed trust) or the principal beneficiary of a special disability trust.
Examples of trustees eligible for the PPR exemption also include trustees:
- Of a fixed trust or bare trust for a person who uses and occupies the land as their PPR,
- Of a trust under a will and used and occupied by one or more persons with a right to reside granted under the terms of the will, and
- Appointed in accordance with a will for a life tenant who uses and occupies the land as their PPR
The PPR exemption is not available for land owned by a trustee of a discretionary trust, a unit trust scheme or a liquidator. However, concessionary tax treatment is available for land held by a trustee of a discretionary trust or a unit trust scheme which is occupied by a beneficiary as their PPR, where the trustee nominates a PPR beneficiary. For land held by fixed trusts or joint ownerships, the exemption can only apply to the share held by an owner or beneficiary who uses the land as their PPR
Where the land is used as a PPR by a natural person who has been granted a right to reside there under a will or testamentary instrument, these requirements must also be satisfied for a PPR exemption to apply:
- Immediately before the person was granted a right to reside on the land, the land was exempt PPR land of the deceased,
- The right to reside was not granted or acquired in exchange for monetary consideration, and
- The person who has the right to reside does not have another PPR in Victoria or elsewhere
If a person who is granted a life estate under a will uses and occupies that land as their PPR, a PPR exemption is available.
Where the individual owner or the vested beneficiary who was using the land as their PPR dies, the PPR exemption continues to apply to that land until the earlier of:
- Three years after the death of the individual owner or vested beneficiary, or a further period approved by the Commissioner of State Revenue (the Commissioner),
- The interest of the individual owner or vested beneficiary is given to another person under a trust, or
- The land is sold or transferred to a new owner
Note: this exemption ceases if the land is rented out following the death of the former owner or vested beneficiary.
To be eligible for the PPR exemption, certain land and occupancy requirements must be satisfied.
The PPR exemption is generally only available for one residence in a land tax year, so if you own more than one Australian property, you need to select only one as your PPR.
There must be a building affixed to the land which is designed and constructed primarily for residential purposes and can lawfully be used as a place of residence. For newly built homes, this means the certificate of occupancy must have been issued.
Where the landowner is an individual owner or eligible trustee, that landowner or the vested beneficiary of the eligible trust must live on the land for at least six months from 1 July of the year before the assessment to be eligible for the PPR exemption.
We may defer the payment of land tax for six months if the landowner or vested beneficiary is unable to meet this requirement because either:
- They started occupying the land on or after 1 July of the year before the assessment, or
- The land was purchased on or after 1 July of the year before the assessment and they didn’t start living on it in the year before the assessment
After that six-month period, provided the land has been continuously used as a PPR by an individual owner or vested beneficiary, an exemption will apply to that land for the relevant assessment year.
Jorge continuously uses land as his PPR for six months from 1 September 2017 to February 2018. The land would be PPR exempt for the 2018 assessment year.
Wei-Ai purchased a property in November 2017, but only started living in it on 2 February 2018. By 2 August 2018, she had continuously used the land as her PPR for six months. The land would be PPR exempt for the 2018 assessment year if she did not occupy any other property she owns as her PPR between the dates that she is claiming the PPR exemption.
If you need to defer your land tax assessment until you are able to live on the land continuously for six months, please call us on 13 21 61 with your assessment handy.
The PPR exemption can extend to adjoining (contiguous) land that is also owned by the individual owner or eligible trustee if this land:
- Does not contain a separate residence,
- Enhances the PPR land, and
- Is used solely for the private benefit and enjoyment of the individual owner or the vested beneficiary living on the PPR land
A separate residence is a building affixed to the land that is capable of separate occupation. Accordingly, if the adjoining land contains a house or granny flat, the PPR exemption cannot extend to the adjoining land. A building that does not have all the amenities of an ordinary home, such as kitchen and bathroom facilities, is not considered a separate residence for the purpose of the PPR exemption.
Examples that may qualify for this exemption include adjoining land containing a pool, tennis court or garden, provided the adjoining land does not also contain a separate residence.
Note: prior to the 2013 land tax assessment year, provided the land met the other requirements, this exemption was available where the adjoining land had a separate residence.
An additional PPR exemption is available where an individual owner or eligible trustee purchases new land to be used as a PPR but, as at 31 December of the year before the assessment year, has not yet moved out of their existing PPR.
In these circumstances, both the new PPR and old PPR will be exempt from land tax for that assessment year. However, the owner or trustee cannot derive any income from the new PPR while it is not occupied as their PPR.
This additional exemption may be revoked if the individual owner or vested beneficiary does not move into the new PPR within 12 months of its purchase and use the new land as their PPR for at least six continuous months.
A dual PPR exemption is also available where an individual owner or vested beneficiary has moved into a new PPR but, as at 31 December of the year before the assessment year, still owned the old PPR.
In this case, both the old and new PPR will be exempt for that assessment year even though the owner or beneficiary is no longer living in the old PPR.
The individual owner or trustee cannot derive any income from the old PPR land while it is not occupied as their PPR and the exemption may be revoked if the old PPR has not been sold by the end of the assessment year for which the exemption is granted.
When a person changes the way they use their PPR, their eligibility for the exemption can be affected.
A PPR exemption may continue or be granted where the individual owner or vested beneficiary is temporarily absent from their PPR. This may be due, for example, to working interstate or overseas.
For this exemption to apply for a given assessment year, the owner or vested beneficiary must have either obtained a PPR exemption or used the property as their PPR for at least six consecutive months immediately before the absence and must satisfy us that:
- The absence is only temporary,
- The individual owner or vested beneficiary intends to resume occupation of the PPR after their absence,
- No other land is exempt PPR land in Victoria or elsewhere during their absence, and
- The rental requirement is satisfied
Prior to the 2013 assessment year, the rental requirement is satisfied if the owner or trustee did not rent out the land for six consecutive months or more in the assessment year during the period of absence.
From the 2013 assessment year onwards, the rental requirement is satisfied if the owner or trustee did not rent out the land for six months or more in the year before the assessment year during the period of absence.
This PPR exemption is limited to six years from the date the absence started.
The PPR exemption is available where the individual owner or vested beneficiary is absent from their PPR because they can no longer live there independently and require full-time care:
- In a hospital as a patient,
- In a residential care facility, supported residential service or a residential service for people with disabilities, or
- With a carer who provides care to the individual owner or resident vested beneficiary on a daily basis
Note: this exemption is not available if the individual owner or trustee rents out the land for six months or more in the year before the tax year, for all relevant years being claimed.
Where land being used as a PPR becomes unfit for occupation due to damage or destruction caused by a natural disaster (such as a fire, earthquake, or storm), accident or malicious damage, the PPR exemption will continue as if the individual owner or vested beneficiary still uses and occupies the land as their PPR.
The exemption is available for up to two years after the date on which the land becomes unfit for occupation as a PPR. This period may be extended for an additional two years if the Commissioner is satisfied there has been an acceptable delay beyond the control of the individual owner or eligible trustee.
A PPR exemption for land that is unfit for occupation is not available if other land owned by the individual owner or eligible trustee is eligible for the PPR exemption.
Where a landowner or vested beneficiary is unable to occupy land as their PPR because a residence was being built or renovated on it, the owner or eligible trustee is required to pay land tax while it is unoccupied.
Once they start or resume using and occupying the land as their PPR for six continuous months, they can apply for a refund of up to two years’ of land tax paid during the time of construction or renovation. This is known as a section 61 refund.
The application for a refund must be made before 31 December of the year after the year the landowner or vested beneficiary started or resumed using the land as their PPR.
A refund of tax paid may also be available for two additional years if the Commissioner is satisfied there was an acceptable delay in starting or finishing building work which was beyond the control of the landowner. This is intended to cover delays caused by unexpected events, planning delays, damage or destruction.
To qualify for a refund for any of the four years, the landowner or trustee must not have been eligible for a PPR exemption on any other land and must not have derived any income from the land in question during that time. To qualify for the refund from the second to fourth years, the owner or trustee must have been entitled to a refund of the immediate preceding year.
Failure to satisfy the six month occupancy requirement may constitute a notification default and may result in the property being reassessed for land tax with penalties and interest.
If the property was being renovated, the renovations must be so substantial that the landowner or vested beneficiary could not live in the property during the renovation.
Where a substantial business activity is conducted on the land being used as a PPR, an exemption will apply only to the portion of the land which is used for residential purposes by the individual owner, vested beneficiary or the person with the right to reside.
The apportionment is based on either the floor space of a building or land area. The Commissioner may consult with the Valuer-General regarding apportionment.
If the PPR land contains a separate residence, such as a granny flat or bungalow, which is leased to a residential tenant, land tax will be assessed on the part of the PPR land that is leased.
The PPR exemption will only apply to the part of the land used for residential purposes by the individual owner, vested beneficiary or person with the right to reside.
Where only some of the vested beneficiaries of the trust reside at the PPR land, an exemption or refund will be limited to the proportion of the land which the vested beneficiary, who uses the land as their PPR, has an interest in.
Mark and Nicola are the vested beneficiaries in the Red House under a fixed trust. They have equal interests. Only Mark lives there. He is entitled to a land tax exemption on his 50% share of the value of the Red House. Nicola is not entitled to a land tax exemption on her share of the Red House.
For the purposes of the PPR exemption, it does not matter if you own the land jointly with others.
If you use and occupy the land as your PPR, you are exempt from land tax on the land.
If my land is entitled to the 'main residence' exemption from capital gains tax, is it also entitled to the PPR exemption from land tax?
The requirements for the 'main residence' exemption from capital gains tax are not the same as those for the PPR exemption, which means that you may not be entitled to both.
Capital gains tax is administered by the Australian Taxation Office.